Should you still invest in a fixed deposit?

There is nothing called as investing in a fixed deposit, because those who keep their money in a fixed deposit are not investing it, they are merely parking it. And to park money, Liquid Debt Mutual Funds are much better than Fixed Deposits.

Here are some comparisons between fixed deposits and Liquid Debt Mutual Funds:

1. You cannot withdraw money in a fixed deposit without severe penalties. A Mutual Fund allows you to invest and withdraw at any time without penalties.

2. A fixed deposit return is guaranteed. A Liquid Debt Mutual fund gives you better returns almost all the time, though returns are not guaranteed. There is no TDS on a Liquid Mutual Fund.

3. A Fixed deposit is taxed at your income tax rate. A Liquid Debt Mutual fund is taxed at the same rate, but the tax reduces after three years of holding.

4. In a fixed deposit you are taxed on ALL the money you invest. In a Liquid Debt Mutual Fund you are taxed only on the part you withdraw at any given time.

So would you like to:

1. Pay more taxes,

2. Lock your money,

3. Pay penalties on withdrawing your own money, and

4. Get less interest?

If you do, Fixed deposits are for you. If, on the other hand, you want to make your money work harder, Liquid Debt Mutual Funds are a better option. You can know more here: click here

Write to us to invest better.

Where can I invest for 2-3 years in a Mutual fund?

For a duration of 2 -3 years you can get returns of approximately 8% to 9% through debt/liquid funds as of 2015. These funds are quite safe and deliver returns slightly above FDs. These funds are

taxable. Any interest you earn will be taxed as part of your income.

You can also look to invest in Fixed Maturity Plans, which give higher returns, but these are illiquid. You will not be able to take out your money before maturity.

You can look to invest in Arbitrage Mutual Funds. There give returns similar to Liquid Debt Funds, but the returns in an Equity Mutual Fund are tax free after one year of holding. Even for sales within a year, returns are taxed at approximately 15%.

If you want to run greater risks for higher returns, then you can try Balanced Funds. These could give you-20% to +50% in two years and will be tax free if you hold for more than 1 year.

To make  good choice you need to understand fund objectives, category, house, manager, holdings, yields, expenses, and history among other things. Knowing exactly which funds to pick, and for how long to keep with it requires deep understanding. We are happy to help you with that if you invest through us at SphereGreen.